Industrial companies in developed countries have been increasingly going digital during the last 10 years as a means to cut costs or to differentiate themselves from competitors. In the pharmaceutical and biotech industry the digital journey started mostly in marketing – from virtual detailing for HCPs, social media campaigns, or influencer partnerships with KOLs to more complex AI-powered patient engagement platforms or collaboration with telehealth providers – or and research & development – from use of AI in drug discovery and digital twins to use of real world evidence in trial design or use of machine learning in biomarker identification. Only recently, mostly driven by advancements in AI and blockchain technologies, pharma companies moved their digitalization focus towards manufacturing – often called pharma manufacturing 4.0, which includes use of IoT sensors mostly for maintenance purposes (eg, Pfizer) use of digital twins for process optimization (eg, GSK) as well as real time monitoring across all manufacturing assets (eg, Roche) or AI-based image recognition in quality assurance (eg, Merck) and supply chain – from use of blockchain for supply chain transparency and raw materials/finished products traceability (eg, Boehringer Ingelheim) to AI-driven demand forecasting (eg, Bayer).
The pharma supply chain – driven by high complexity and fragmentation from the variety of products, assets and regulatory requirements – offers many opportunities for improvement through digitalization, thereunder:
- Enhanced Supply Chain Visibility:
- Real-time tracking of raw materials, intermediates, and finished products ensures better control and traceability, reducing risks such as counterfeit drugs and theft.
- Increased transparency fosters compliance with regulatory requirements like FDA and EU GMP guidelines.
- Improved Forecasting and Inventory Optimization:
- AI and predictive analytics can analyze historical and real-time data to accurately forecast demand, reducing stockouts and overstocking.
- Machine learning models can optimize production schedules and inventory levels to minimize waste and costs.
- Faster Drug Delivery and Patient-Centric Models:
- Digitization enables just-in-time manufacturing and faster response to market demands, especially for personalized medicine and rare disease drugs.
- Direct-to-patient models can be supported through digital platforms, enhancing accessibility.
- Increased Regulatory Compliance:
- Blockchain and IoT technologies can provide an immutable audit trail for drug production and distribution, ensuring adherence to stringent industry regulations.
- Automated systems minimize human error in record-keeping and quality assurance.
- Enhanced Risk Management:
- Early warning systems using AI and real-time data can predict and mitigate risks such as supply disruptions, quality issues, and non-compliance.
- Scenario modeling helps prepare for challenges like pandemics or geopolitical disruptions.
- Achieving sustainability Goals:
- Digital tools can optimize routes, reduce waste, and support sustainable packaging initiatives, helping companies meet environmental targets.
At the same time, pharma supply chains – especially at mid and big pharmacos resulting from many acquisitions – face a few challenges that have to be managed carefully:
- Data Silos and Integration:
- Many pharmaceutical companies use disparate systems, leading to fragmented data that hinders the creation of a unified digital ecosystem.
- Integrating legacy systems with modern digital platforms can be complex and costly.
- Regulatory and Compliance Complexity:
- Compliance with global regulations (e.g., FDA, EMA, WHO) can slow down implementation, especially for cross-border operations.
- Digital tools must be validated to meet strict requirements, adding time and cost.
- High Implementation Costs:
- Deploying advanced technologies such as IoT, AI, and blockchain requires significant upfront investment.
- Balancing cost versus return on investment (ROI) can be challenging for companies with tight margins.
- Cybersecurity Risks:
- As supply chains become more digital, they become targets for cyberattacks, risking data breaches and operational disruptions.
- Ensuring robust cybersecurity measures while maintaining system efficiency is a major challenge.
- Change Management and Resistance:
- Employees and partners may resist adopting new technologies due to lack of familiarity or fear of job displacement.
- Training programs and cultural shifts are essential to drive adoption but can be time-consuming.
- Scalability Across Global Operations:
- Pharmaceutical companies often operate in diverse markets with varying regulations, infrastructure, and technology readiness.
- Rolling out digital transformation initiatives globally while adapting to local conditions can be complex.
- Quality and Data Reliability:
- AI and predictive models rely on high-quality data, which is not always readily available.
- Ensuring the accuracy and consistency of data across the supply chain is critical for effective decision-making.
While there seems to be no “golden recipe” to make a company’s digital journey a successful one, a few general principles are being accepted by the digitalization community as a good base to start with:
- Define a Clear Vision and Strategic Goals: Before initiating a digital transformation, it is essential to outline a clear vision for the future supply chain aligned with organizational objectives. This vision should account for external pressures such as market dynamics, customer expectations, and regulatory landscapes. For example, pharma companies may aim to create low-cost supply chains to meet healthcare provider constraints or improve end-to-end visibility for better customer experiences.
- Build Data-Centric Foundations: Data is the lifeblood of digital transformation. Establishing a robust data strategy that includes the collection, storage, and governance of data is critical. Companies should avoid delays by simultaneously building their data foundations and implementing digital use cases. Advanced data architectures and governance frameworks can democratize data access while maintaining quality and security standards. For example, real-time analytics powered by machine learning can optimize material planning and customer order management, enabling better decision-making
- Foster Agile and Collaborative Operations: Agility and collaboration are central to digital transformation. Pharma companies should adopt two-speed approaches—focusing on maintaining operational reliability while rapidly piloting and scaling digital innovations. Agile methodologies, incubators, and multifunctional teams help organizations test and refine solutions efficiently. Collaboration across departments ensures alignment and prevents regressions into outdated processes. A standout example is leveraging robotic process automation (RPA) for repetitive tasks, which enhances efficiency without compromising quality. For instance, RPA has been used to automate order processing, reducing errors and saving employee hours
- Leverage Emerging Technologies: Advanced technologies like IoT, AI, and blockchain are transforming supply chains. These tools enhance visibility, traceability, and predictive capabilities. For example, track-and-trace systems provide real-time updates on shipments, ensuring transparency. Cloud-based solutions and APIs streamline integration with legacy systems, facilitating smoother transitions to digital platforms. Innovative solutions also extend to automating planning processes, such as digital Sales and Operations Planning (S&OP), which reduces manual efforts and improves workflow management
- Balance Risk and Scalability: Digital transformation in the pharma supply chain involves inherent risks, including “pilot purgatory” (failure to scale projects) and over-promising capabilities beyond current technological limits. Companies can mitigate these risks by adopting a scalable approach, starting with minimum viable products (MVPs) and gradually integrating successful pilots into the broader organization. Establishing incubators separate from legacy systems helps manage rapid development cycles without disrupting ongoing operations
- Enhance End-to-End Visibility: Digital transformation should prioritize end-to-end supply chain visibility. Implementing big data and analytics tools enables companies to track supply chain performance, identify bottlenecks, and make data-driven decisions. This approach not only enhances transparency but also builds trust with stakeholders by providing actionable insights in real time. Pharma companies that have adopted these tools report significant improvements in inventory management and service levels
- Drive Continuous Innovation: A culture of continuous innovation ensures that digital transformation remains dynamic and responsive to market changes. By regularly reviewing and adapting strategies, pharma companies can stay ahead of competitors and meet evolving customer needs. Strategic partnerships and cross-functional collaborations foster a steady pipeline of innovative ideas, enabling companies to expand into new markets and refine existing processes.
- Invest in Talent and Leadership: The human element plays a pivotal role in transformation. Success depends on cultivating digital skills within the existing workforce and attracting new talent with expertise in digital and analytics. Roles such as “translators” bridge the gap between technical and operational teams, ensuring seamless collaboration. Pharma companies must also reskill their workforce to manage and interpret digital tools effectively. Partnerships with academic institutions and industry collaborations can be strategic in accessing cutting-edge expertise. Balancing traditional expertise (the “samurais”) with innovative digital capabilities (the “ninjas”) ensures sustainable change. This approach fosters a mentoring culture where experienced professionals learn digital tools while digital natives gain insights into traditional processes.
About the interviewees
Milena Saleh is senior manager at execon partners and and an expert in digital transformation
Lorenzo Formiconi is managing partner at execon partners and an expert in operations management and digital transformation